Obama urges short-term solution to prevent steep budget cuts

WASHINGTON – President Obama on Tuesday called on Congress to come up with short-term spending cuts and revenue increases that would stave off more drastic cuts set to take effect in March.

In a brief appearance in the White House briefing room, Obama asked lawmakers to come up with a quick fix that would postpone the automatic cuts and their "devastating" effects on the economy.

The economy is in recovery, Obama said, but that won’t continue if there are “self-inflicted wounds” caused by elected officials. 

The economy shouldn’t be at risk “just because folks in Washington couldn’t come together to eliminate a few special-interest tax loopholes or government programs that we agreed need some reform,” he said.

PHOTOS: President Obama’s past

The president said he still wants to deal with deficits over the longer term, but that he doesn’t want to see workers laid off and critical programs lapse while Congress works its way to a more broad-based budget solution.

When the automatic cuts were first devised in 2011, the $1.2-trillion in so-called sequester cuts were intentionally designed to be severe. Lawmakers on all sides believed they would force Congress to come up with a better alternative for deficit reduction.

But the deadline is drawing close and the sides are nowhere near a permanent solution. Democrats want to exchange the pending across-the-board cuts for tax revenue generated in part by ending tax breaks for oil and gas companies.

Republicans, meanwhile, see the looming sequester as one of their best chances to exact steep spending cuts. They want to steer away from reductions at the Pentagon and toward Medicare, food stamps and other domestic programs.

PHOTOS: President Obama’s second inauguration

Sen. Mitch McConnell of Kentucky, the Republican minority leader, calls the Democrats' ideas “gimmicks.” House Speaker John A. Boehner (R-Ohio) argues that the public doesn’t support the idea of raising taxes in place of cutting spending.

“The president’s sequester should be replaced with spending cuts and reforms that will start us on the path to balancing the budget in 10 years,” Boehner said.

Speaking to reporters, Obama said he believes “modest reforms” in social insurance programs would eventually have to be paired with tax reform.

For the moment, he said, it appears a full budget “may not be finished” before the automatic cuts kick in. Congress can’t let that happen, he said.

QUIZ: Test your knowledge about the debt limit

“If Congress can’t act immediately on a bigger package,” he said, “they should at least pass a smaller package of spending cuts and tax reforms that would delay the economically damaging effects of the sequester for a few more months.”

After that, he said, the two sides can work together to replace cuts with a “smarter solution.”

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christi.parsons@latimes.com

lisa.mascaro@latimes.com

Twitter: @cparsons and @lisamascaroindc

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Instagram Finally Feeds the Web, But We're Still Hungry

Instagram launched a web-based interface on Tuesday that largely mirrors its mobile app, allowing users to log in from a browser to view and interact with photos from people in your feed. It’s a big move from the company that grew to prominence as a mobile-only social network.

Although Instagram had previously launched web profiles for its users and did give people the ability to interact with others’ photos on the web, it had not offered a way to log in and browse your network’s photo stream in the same way you can within the app. As of today it offers that same experience on the web.

While the ability to interact and view a feed from the desktop is great, it’s also a bit puzzlingly put together. The linear experience of vertical photos presented one at a time doesn’t work nearly as well on the web as it does mobile. It means there’s a lot of wasted space on either side of the image. Meanwhile, for a single image, the photos themselves are quite small. It would be great to see them either blown up, or tiled, to make better use of the desktop screen.

Mat Honan is a senior writer for Wired's Gadget Lab and the co-founder of the Knight-Batten award-winning Longshot magazine.

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Kristen Wiig joins “Anchorman” sequel

LOS ANGELES (TheWrap.com) – Kristen Wiig will contribute to the lunacy in “Anchorman: The Legend Continues.”

Director Adam McKay announced on Facebook that the “Bridesmaids” star had joined the cast of the follow-up to the 2004 hit.

“Kristen Wiig is officially on board for Anchorman 2,” McKay wrote. “Couldn’t be more excited.”

TheWrap first reported that Wiig was eyeing the project in December. McKay did not say what role she would play in the film, but sources told TheWrap at the time that she would play the love interest of Brick Tamland, the dim-witted weatherman played by Steve Carell in the first movie.

Will Ferrell, Christina Applegate and Paul Rudd are all reprising their roles in the sequel, with Judd Apatow once again producing the picture.

“Anchorman: The Legend Continues” will hit theaters on December 20, 2013.

The “Saturday Night Live” vet, who earned an Oscar nomination for Best Screenplay for 2012′s breakout hit “Bridesmaids,” will star opposite Ben Stiller in the remake of “The Secret Life of Walter Mitty” and will lend her voice to “Despicable Me 2.”

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SciTimes Update: Recent Developments in Science and Health News

Red Bull Stratos/European Pressphoto Agency

Felix Baumgartner of Austria jumps from 24 miles up in Roswell, New Mexico.

Tuesday in science, sharks with an image problem, good teeth get more dates, dog geniuses and remembering your dreams. Check out these headlines and other science news from around the Web.

Supersonic Skydiver: Skydiver Felix Baumgartner was faster than he or anyone else thought during his record-setting jump last October from 24 miles up. The Austrian parachutist known as “Fearless Felix” reached 843.6 mph, reports The Associated Press.

Stress Through Generations: For the first time, genes chemically silenced by stress during life have been shown to remain silenced in eggs and sperm in mice, possibly allowing the effect of stress to be passed down to the next generation, reports The Washington Post.

Man Bites Shark: A new study refutes the shark’s reputation as a bloodthirsty stalker of humans, reports Reuters. There’s no basis for believing that sharks have a taste for human flesh, the study argues. Human swimmers, often dressed in black wet suits and looking like seals, are instead mistaken for sharks’ usual prey.

What Singles Want: Good teeth, grammar and humor are important to singles, a new USA Today survey reports.

The Farmer’s Workout: Farmers -- the people counted on to feed the nation -- are facing weight gains of their own, reports Gannett News.

Yes, They Do Windows: The Wall Street Journal reports on window-washing robots.

Staying In: To keep patients out of the hospital, health care providers are bringing back revamped versions of a time-honored practice: the house call.

Spill Your Secrets: Teenagers who share their secrets in confidence with parents and friends have fewer headaches and depressed moods and are more confident in social situations than those who keep secrets to themselves, according to a report in The Journal of Adolescence.

Drilling on Mars: NASA’s Curiosity rover, the S.U.V.-sized robot exploring Mars, is getting ready to spin its drill bit for the first time, reports The Christian Science Monitor.

Couch Potatoes: Men who watch a lot of television have lower sperm counts than those who don’t watch any, reports ScienceNews.org.

Dream a Little Dream: Anyone who has ever awoken feeling amazed by their night’s dream only to forget its contents by the time they reach the shower will understand the difficulties of studying such an ephemeral state of mind, reports New Scientist.

Smart Dogs: Scientific American explores the science of dog intelligence.

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Weak Earnings Report for Zynga, but Stock Rises

SAN FRANCISCO — In the 14 months since Zynga sold shares to the public, the online game developer has been on a monumental losing streak. Games have been killed, crucial employees have fled and players have sought excitement elsewhere.

Any hopes that Zynga’s luck has substantially improved were dashed Tuesday when the company reported its fourth-quarter earnings. They were expected to be weak and they generally were, if not nearly as bad as some feared.

Revenue was $311 million, flat with the year before. Daily users of the games were down 6 percent from the third quarter, a clear measure of flagging interest. More casual users dropped as well.

Earnings per share were a penny, better than the 3-cent loss that analysts had been expecting on an adjusted basis. And Zynga’s cash hoard of $1.65 billion was untouched.

For the full year, revenue was $1.28 billion, up 12 percent from 2011. Not exactly what you would expect from a growth company.

Yet the company’s shares immediately rose in after-hours trading by 7 percent.In regular trading they were also up 7 percent to $2.73, largely on the basis of an analyst upgrade from Merrill Lynch. Many online stock sites, by contrast, have been portraying the company as going the way of Pets.com or MySpace. “Zynga’s Earnings May Reveal Its Impending Demise” read the headline at one of them.

Michael Pachter, a managing director of Wedbush Securities, is a Zynga optimist, of a sort. He wrote in an e-mail message before the earnings were released that he had “100 percent confidence” the company could pull off a turnaround but “zero confidence that they will.”

Zynga’s diminishing fortunes illustrate how quickly the prospect of Internet companies can wax and wane — a development compounded by the shift to smartphones. And it has a crucial test coming up: Can it successfully move its most popular games, starting with the Farmville franchise, from PCs to mobile devices?

The bigger issue for Zynga, which pioneered the concept of social gaming and is still the biggest developer, is whether its once-hot hand was merely being in the right place at the right time, a condition also known as dumb luck. Zynga hitched its rise to Facebook, which gave the developer preferential treatment. Games like Farmville and Mafia Wars boomed as the social network expanded its reach.

Only a small sliver of players ever bought the virtual goods that constituted Zynga’s main source of revenue, but that was a problem for the future. For a time in early 2011, Zynga’s initial public offering was touted as being as big as $20 billion. In the end, it was about half that, which was still a major achievement for a company less than five years old.

Almost immediately after the offering, a little over a year ago, the disappointments began. Zynga spent $180 million last March to buy the Internet craze Draw Something, abandoning its usual practice of just cloning hits. Draw Something had about 15 million daily users. Before the ink on the purchase was dry, nearly a third of them had departed for a newer craze. Zynga wrote over half the purchase price, but since Draw Something’s audience has continued to dwindle, the miscalculation was even worse.

More recently, critics have been pointing to the rise of King.com’s games, including Candy Crush, which makes the latest version of Farmville look as complicated as advanced physics.

“Who thought crushing candy would have been popular?” said Brian Blau, a Gartner analyst.

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Suspected child molester left L.A. archdiocese for L.A. schools

A former priest and suspected child molester left employment with the Los Angeles archdiocese to work for the L.A. Unified School District, officials confirmed Sunday.

The former clergyman, Joseph Pina, did not work with children in his school district job, L.A. schools Supt. John Deasy said. He added that, as a result of the disclosures, Pina would no longer be employed by the nation's second-largest school system.

Over the weekend, Deasy was unable to pull together Pina's full employment history, but said the district already was looking into the matter of Pina's hiring.

"I find it troubling," he said of the disclosures about Pina. "And I also want to understand what knowledge that we had of any background problems when hiring him, and I don't yet know that."

L.A. Unified itself has come under fire in the last year for its handling of employees accused of sexual misconduct.

Pina, 66, was laid off from his full-time district job last year, but returned to work episodically to organize events. One event he may have helped organize was a ribbon-cutting Saturday for a new education facility. School district officials over the weekend, however, could not confirm that. Pina did not attend the event, and the district could not confirm payment for any help he may have provided.

Pina's name emerged in documents released by the archdiocese to comply with a court order. His case was one of many in which church officials failed to take action to protect child victims and in which first consideration was given to helping the offending priests rather than their victims, according to the documentation.

A just-released, internal 1993 psychological evaluation states that Pina "remains a serious risk for acting out." The evaluation recounts how Pina was attracted to a victim, an eighth-grade girl, when he saw her in a costume.

"She dressed as Snow White ... I had a crush on Snow White, so I started to open myself up to her," he told the psychologist. "I felt like I fell in love with her. I got sexually involved with her, but never intercourse. She was about 17 when we got involved sexually, and it continued until she was about 19."

In a report sent to a top Mahony aide, the psychologist expressed concern the abuse was never reported to authorities.

Pina's evaluation also includes a recommendation "to take appropriate measures and precautions to insure that he is not in a setting where he can victimize others." Pina continued to work as a pastor as late as March 1998.

School district officials could not verify Pina's hiring date over the weekend, but he took a job with L.A. Unified as the school system was carrying out the nation's largest school construction program. His job involved community outreach, building support for school projects, while also finding out communities' concerns and trying to address them, officials said. Such work was crucial to the program, because even though communities wanted new schools, their locations and other elements could prove controversial. Such projects frequently involved tearing down homes or businesses, environmental cleanups, and the blocking of streets and other disruptions.

"His duties were to rally community support and elicit community comments regarding schools in a neighborhood," district spokesman Tom Waldman said.

Pina's work did bring him into contact with families, frequently at public meetings organized to hear and address their concerns.

Projects that Pina worked on included a new elementary school in Porter Ranch and a high school serving the west San Fernando Valley, Waldman said. The high school, in particular, generated substantial public debate as a district team and a local charter school competed aggressively for control of the site.

The $19.5-billion building program is winding down, and, as a result, many jobs attached to it have come to an end. Pina's was among them.

The dedication he may have helped organize Saturday was for the Richard N. Slawson Southeast Occupational Center in Bell. Participants told KCET-TV, which first reported Pina's school employment, that he had assisted with community outreach on that project. The adult education and career technical education facility has 29 classrooms as well as health-career labs and child care for students. The school opened in August 2012.

Pina "was slated for some additional temporary work when the issue came to our attention last week and that work was canceled," Deasy said.

It may have been Pina who first alerted district officials that his name appeared in disclosed documents, Deasy said. Pina called a senior administrator in the facilities division. So far, no untoward issues have emerged regarding Pina's work for L.A. Unified.

howard.blume@latimes.com

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Reader Poll: Are You Binge-Watching <em>House of Cards</em>?

Last Friday, Netflix released 13 episodes — a complete season — of its new self-produced political drama House of Cards online at the same time. It was the first step in the company’s innovative media experiment, which obliterates the traditional television distribution model and poses the question: How will people choose to watch a new television show when its content is released en masse rather than parceled out week by week?

In a recent letter to investors, Netflix CEO Reed Hastings asked shareholders to imagine “if books were always released one chapter per week, and were only briefly available to read at 8 p.m. on Thursday. And then someone flipped a switch, suddenly allowing people to enjoy an entire book, all at their own pace. That is the future we are bringing about. That is the future of television. That is the future of Internet TV.”

Putting aside the fact that serialized literature was once a hugely popular format for fiction — and that modern writers like John Scalzi are resurrecting it in the digital sphere — it’s an ambitious and fascinating move that was greeted with mixed reactions from media critics, including Variety‘s Andrew Wallenstein, who dubbed it a “mistake” and declared that “Netflix must rethink binge-viewing.”

So how did the first Netflix-produced original content fare after its season-wide debut?

Karen Barragan, the Head of PR for Original Series at Netflix, told Wired the company was “very happy” about the show’s performance, but declined to release any data about its streaming viewership. “We’ve said from the beginning that this is a different model. I’m glad that we’re not going to jam the old metrics into the new model … because it doesn’t matter. It doesn’t matter if you watch it over the weekend, if you’re going to watch it over three months.”

But Procera, a network traffic management and tracking company that monitors activity on five out of the top 10 cable ISP providers and three out of the top five DSL providers in North America, released its own analytic snapshot of House of Cards viewership on one broadband network (which they declined to name) during Saturday, when they say binge viewing was most likely to occur.

“Two percent of the subscribers watched the first one, but maybe only .5% made it through to the final one,” Procera’s VP of Global Marketing Cam Cullen told Wired. “Although each episode was not a major factor in overall traffic on this network (especially since the episodes are ~50 minutes long), in aggregate they add up,” he elaborated in his online analysis. “It is clear that the first few episodes were the most heavily watched, but the later episodes got their fair share of action. We even saw one subscriber on a network that consumed 16G of his usage on House of Cards over the weekend.”

Cullen also noted that 11 percent of Netflix viewers watched at least one episode of House of Cards on one network they monitor, and comprised almost 5 percent of overall Netflix bandwidth usage on another.

The 13th and final episode of House of Cards pulled in roughly 28% the viewership of the series premiere in the Procera snapshot of Saturday traffic, indicating that quite a few people who started watching the series stayed in it for the long haul — and did so within a day of the release.

Despite the innovation involved in applying the full-season approach to new content, the (binge) viewing experience shouldn’t feel entirely unfamiliar — at least to anyone who’s watched television shows on Netflix before. After all, the video streaming (and previously, DVD-shipping) service is already how a lot of viewers catch up on entire seasons of TV shows that they’ve missed.

Netflix was how I watched the first three seasons of Lost after I showed up late to the party of that particularly addictive prime-time drama, and seeing it for the first time in a format where I could immediately fast-forward to the next episode was a revelation — and a recipe for binge-watching, particularly on a show where nearly every episode ended in a cliffhanger. A light went on inside the hatch! Next. Holy crap, a smoke monster! Next. No designated broadcast time slots, no waiting.

Of course, Lost was compelling enough that I would have waited the week and tuned in regardless — and did so, during subsequent seasons — but a better question is what sort of impact a full-season release could have for shows that aren’t quite so addictive, especially during the critical moment of their premiere. Speaking from personal experience: a lot.

After watching the mediocre premiere of the new Fox serial killer drama The Following a few weeks ago, a friend asked me if I’d tune in for a second episode. “Probably,” I said. And if I’d had the opportunity to click “Next Episode” the moment that premiere finished, there’s a good chance I would have. But when that second episode showed up on Hulu the next week, my cursor hovered briefly over the icon… and then moved on. It had been just good enough to pique my interest in the moment, but seven days later that middling momentum had been lost.

My reaction to the House of Cards premiere was equally mixed — on the one hand, Kevin Spacey; on the other hand, Kevin Spacey’s Southern accent — and yet somehow I still ended up watching the complete series in one sitting on Friday night, an absurd binge that ended somewhere around 5 AM on Saturday morning. Reflecting on it now, the most remarkable thing is that despite consuming 13 hours of the series, I can’t honestly say that I liked it.

It’s not a great show; it’s debatably a good one, but more relevantly it was just good enough to make me press “Next” every time the episode finished, like a bird pecking at a button that intermittently dispenses food in an operant conditioning experiment. Or perhaps more like Desmond, entering the Numbers over and over inside the digital hatch of Netflix — not sure what would happen if I stopped, and never quite mustering the will to find out when it was so much easier to keep on pushing the button.

Roberto Baldwin contributed to this report.

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NFL says no indication Beyonce show caused Super Bowl outage

NEW ORLEANS (Reuters) – The National Football League was still working with New Orleans officials on Monday to determine what caused the power outage at Sunday’s Super Bowl at the Superdome, so far dismissing any connection with the Beyonce halftime show.

With a record U.S. television audience watching along with viewers in 180 countries, about half the stadium lights went dark early in the second half of the game, in which the Baltimore Ravens defeated the San Francisco 49ers, 34-31.

NFL commissioner Roger Goodell told reporters on Monday an investigation was under way to determine the cause of the 35-minute disruption but one possible explanation had already been eliminated.

“There’s no indication at all that this was caused by the halftime show,” Goodell said. “I know that’s out there, that Beyonce’s halftime show had something to do with it. That is not the case from anything we have at this point.”

Entergy Corp, the utility providing power to the Superdome, said its distribution and transmission feeders were serving the Superdome at all times.

Early indications were that the outage resulted from an abnormality in the Superdome’s power system but it was too early to speculate on what went wrong, said Doug Thornton, senior vice president of the Superdome’s management company, SMG.

A piece of equipment designed to monitor electrical load sensed an abnormality in the system where the Superdome equipment intersects with Entergy’s feed into the building, triggering an automatic cut in power, SMG and Entergy said in a joint statement.

There was never any concern the power could not be restored, but it took time because of the size of the stadium and the complexities of the power system, Thornton said.

“We had people in place that could quickly work to restore power. We had experts on site, as we normally do when we have big events like this, our electrician, our electrical consultants were there and we were able to quickly work on that,” Thornton said.

“There were no injuries, people remained calm, we had a pre-programmed announcement that was actually played. These are things that we actually drilled for.”

None of the players or coaches said the stoppage had any impact on the game, and Goodell said the power problem would not adversely affect future bids by New Orleans to stage the Super Bowl, the United States’ most-watched sports event.

“I fully expect that we will be back here for Super Bowls,” Goodell said. “I hope we will be back. We want to be back … I don’t think this will have any impact at all on what I think will be remembered for one of the greatest Super Bowl weeks.”

(Editing by Daniel Trotta and Dale Hudson)

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Well: Expressing the Inexpressible

When Kyle Potvin learned she had breast cancer at the age of 41, she tracked the details of her illness and treatment in a journal. But when it came to grappling with issues of mortality, fear and hope, she found that her best outlet was poetry.

How I feared chemo, afraid

It would change me.

It did.

Something dissolved inside me.

Tears began a slow drip;

I cried at the news story

Of a lost boy found in the woods …

At the surprising beauty

Of a bright leaf falling

Like the last strand of hair from my head

Ms. Potvin, now 47 and living in Derry, N.H., recently published “Sound Travels on Water” (Finishing Line Press), a collection of poems about her experience with cancer. And she has organized the Prickly Pear Poetry Project, a series of workshops for cancer patients.

“The creative process can be really healing,” Ms. Lotvin said in an interview. “Loss, mortality and even hopefulness were on my mind, and I found that through writing poetry I was able to express some of those concepts in a way that helped me process what I was thinking.”

In April, the National Association for Poetry Therapy, whose members include both medical doctors and therapists, is to hold a conference in Chicago with sessions on using poetry to manage pain and to help adolescents cope with bullying. And this spring, Tasora Books will publish “The Cancer Poetry Project 2,” an anthology of poems written by patients and their loved ones.

Dr. Rafael Campo, an associate professor of medicine at Harvard, says he uses poetry in his practice, offering therapy groups and including poems with the medical forms and educational materials he gives his patients.

“It’s always striking to me how they want to talk about the poems the next time we meet and not the other stuff I give them,” he said. “It’s such a visceral mode of expression. When our bodies betray us in such a profound way, it can be all the more powerful for patients to really use the rhythms of poetry to make sense of what is happening in their bodies.”

On return visits, Dr. Campo’s patients often begin by discussing a poem he gave them — for example, “At the Cancer Clinic,” by Ted Kooser, from his collection “Delights & Shadows” (Copper Canyon Press, 2004), about a nurse holding the door for a slow-moving patient.

How patient she is in the crisp white sails

of her clothes. The sick woman

peers from under her funny knit cap

to watch each foot swing scuffing forward

and take its turn under her weight.

There is no restlessness or impatience

or anger anywhere in sight. Grace

fills the clean mold of this moment

and all the shuffling magazines grow still.

In Ms. Potvin’s case, poems related to her illness were often spurred by mundane moments, like seeing a neighbor out for a nightly walk. Here is “Tumor”:

My neighbor walks

For miles each night.

A mantra drives her, I imagine

As my boys’ chant did

The summer of my own illness:

“Push, Mommy, push.”

Urging me to wind my sore feet

Winch-like on a rented bike

To inch us home.

I couldn’t stop;

Couldn’t leave us

Miles from the end.

Karin Miller, 48, of Minneapolis, turned to poetry 15 years ago when her husband developed testicular cancer at the same time she was pregnant with their first child.

Her husband has since recovered, and Ms. Miller has reviewed thousands of poems by cancer patients and their loved ones to create the “Cancer Poetry Project” anthologies. One poem is “Hymn to a Lost Breast,” by Bonnie Maurer.

Oh let it fly

let it fling

let it flip like a pancake in the air

let it sing: what is the song

of one breast flapping?

Another is “Barn Wish” by Kim Knedler Hewett.

I sit where you can’t see me

Listening to the rustle of papers and pills in the other room,

Wondering if you can hear them.

Let’s go back to the barn, I whisper.

Let’s turn on the TV and watch the Bengals lose.

Let’s eat Bill’s Doughnuts and drink Pepsi.

Anything but this.

Ms. Miller has asked many of her poets to explain why they find poetry healing. “They say it’s the thing that lets them get to the core of how they are feeling,” she said. “It’s the simplicity of poetry, the bare bones of it, that helps them deal with their fears.”

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DealBook: Suit to Accuse S.&P. of Fraud in Mortgage Bond Ratings

The Justice Department, along with state prosecutors, plans to file civil charges against Standard & Poor’s Ratings Service, accusing the firm of fraudulently rating mortgage bonds that led to the financial crisis, people briefed on the plan said Monday.

A suit against S.&P. — expected to filed this week — would be the first the government has brought against the credit ratings agencies related to the financial crisis, despite continued questions about the agencies’ conflicts of interest and role in creating a housing bubble.

Several state prosecutors are expected to join the federal suit. The New York State attorney general is conducting a separate investigation, an official in that office said. The official declined to say whether New York State’s action involved other ratings agencies besides Standard & Poor’s.

Up until last last week, the Justice Department had been in settlement talks with S.&P., these people said. But the negotiations broke down after the Justice Department said it would seek a settlement in excess of “10 figures,” or at least $1 billion, these people said. Such an amount would wipe out the profits of S.&P.’s parent, the McGraw-Hill Company, for an entire year. McGraw-Hill earned $911 million last year.

During settlement negotiations, the Justice Department held out the threat of a criminal case against S.&P., the people said. Ultimately, the government plans to bring a civil suit, which has a lower burden of proof than a criminal case.

The case is expected to be brought in California, these people said. The state suffered disproportionately during the housing bubble, and the government is hoping the venue will yield more sympathetic jurors.

The case is focusing on about 30 collateralized debt obligations, an exotic type of mortgage security. According to S&P, the mortgage securities were created in 2007 at the height of the housing boom.

Prosecutors, according to the people, have uncovered troves emails by S&P, employees, which the government considers damaging. Portions of those emails are likely to be disclosed in the government’s complaint against S&P, these people said.

In a statement on Monday, S.&P. said it had received notice from the Justice Department over a pending lawsuit. The ratings agency argued any such legal action would be baseless, since it downgraded plenty of mortgage-backed investments, including in the two years leading up to the financial crisis. It also contended that other observers of the debt markets, including government officials, believed at the time that any problems within the housing sector could be contained.

“A D.O.J. lawsuit would be entirely without factual or legal merit,” the agency said in its statement. “With 20/20 hindsight, these strong actions proved insufficient – but they demonstrate that the D.O.J. would be wrong in contending that S.&P. ratings were motivated by commercial considerations and not issued in good faith.”

Shares of McGraw-Hill closed down nearly 14 percent on Monday, at $50.30.

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